Managing incapacity: incapacity and the law

These concerns are all rooted in costs and productivity and it is fair to say that absence costs are the key driver towards more effective management of incapacity.

The cost of absence

The latest CBI annual survey on absence management,² conducted in 2001 and covering more than 740 organisations, has produced some startling results. Although the overall number of absences, in terms of the number of working days lost, has gone down (from 192 million in 2000 to 176 million in 2001) workplace absence is costing employers more than ever - from £10.7bn in 2001 to £11.8bn in 2002. And research by The Work Foundation has found that sickness absence rates increased in 2002 by more than a third to 4.9 per cent, or nine days per employee per year, from 2 per cent in 2001.³

The highest price is paid by employers in the public sector. In 2000, the average cost per employee in the public sector was £482; by 2001 this had risen to £518, according to the CBI. The average annual cost in the private sector is significantly lower, £474 per employee for 2001 compared to £482 in 2000.

As important as these direct costs are, the hidden costs involved could be even higher. For example, the inconvenience of hiring short-term employees and temporary workers to cover for absentees, the obvious disruption that ensues as a result of absent employees, and the increased burden that gets placed on the colleagues of the absent employee who are left to pick up overflow work.

A study by the Institute of Employment Studies⁴ found that employee groups with a higher proportion of long-term absence, and where cover for absence is likely to involve paid internal replacement staff or agency temps, have higher absence costs. The study also shows that lower absence rates do not in themselves mean lower absence costs.

Despite these worrying findings, most HR departments do not bother to calculate the cost of absence. According to a February 2003 survey of 403 HR specialists by The Work Foundation, only 43 per cent do so.

Looking behind the figures there are lessons to be learned.

The CBI survey reveals that absence levels are at the lowest where senior management are responsible for sickness management procedures. Yet despite the difference in working days lost per year in 2001 being almost two days, only half of all line managers are given training in this area - proof that investing in training at all levels of your organisation can significantly cut down on workplace absence.

The CBI survey also showed that only 9 per cent of employers effectively monitor the indirect costs of workplace absence. Looking at the indirect as well as the direct costs of workplace absence, underlines the scale of the problem. Line managers are the first and best line of defence - unless they are given information on absence patterns they may not be aware of trends.

In both the public and private sector, employers picked the 'return-to-work interview' as the most important tool in managing sickness absence, emphasising, as in so many areas of human resources, that communication with employees is vital.

There are some noticeable trends in the reasons behind employee absence. The TUC report Focus on Services for Injury Victims, dated 2 February 2002,⁵ demonstrates that stress claims have risen twelvefold since 2000. This huge increase reflects the fact that stress has become a recognised cause of occupational illness and that the working environment generally is becoming increasingly stressful. It also reflects the fact that the determination of the unions over the past decade, to put health and safety issues at the very top of their agenda, has finally paid off. Figures from the Health and Safety Commission for 2000-2001 show that of 40.2 million days lost to illness, 13.4 million were attributed to stress, anxiety or depression. Another 12.3 million were due to musculoskeletal disorders.⁶

Incapacity can, and indeed must, be proactively managed, yet the issues are complex. This guide aims to equip you with the information and guidance you need to find a route through the law that works for your organisation; whether that is managing someone back to work or managing them out. Too many managers feel paralysed when an employee is signed off work with stress; use this guide to give you the confidence to regain management control.

The positive message is that nowhere in the employment protection legislation (whether that is unfair dismissal or disability discrimination) are employers prevented from dismissing an employee who is on long-term sick leave.

What is required is to follow a fair procedure and a prescribed standard of conduct, acting reasonably and dealing proactively with employees. Your aim must be to develop a culture where sickness is not a 'get-out' to what would otherwise be a performance-related dismissal.

Holistic approach

The legal issues on incapacity are multi-layered and interconnected. It is practically impossible to consider in isolation the whole range of obligations that you may have. Above all, you need to adopt an holistic approach.

Absence rates 1999-2002 (specific sectors)

Source: IES Report 382, 2001

FURTHER INFORMATION

¹Bevan Stephen, 'Counting the Cost of Sickness Absence' , IRS Employment Review, Issue 739, 2001

²CBI Absence and Labour Turnover survey 2002: Counting the Costs

³Maximising attendance, Managing Best Practice no. 96, The Work Foundation, Jan 2003

⁴Bevan S and Hayday S, Costing Sickness Absence in the UK, IES Report 382, 2001

⁵Focus on Services for Injury Victims, TUC report, 2 February 2002

⁶www.hse.gov.uk/statistics